The trucking industry is an expensive network. Some truck drivers are employed by a trucking company and are paid based on the hour or the miles they have covered by the company, or some owner-operators have their trucks and plan there own schedules. As per some statistics, the average income of the owner-operator is around $220,000 but this is before eliminating the cost of expenses. Many things are held accountable by an owner-operator, like maintenance, fuel, taxes, licenses, permits, tolls, etc.
Below are some of the prime expenses that the trucking company or owner-operator needs to spend.
It is one of the biggest and most important things needed at the cost of money. Fuel consumes around $50000 to $70000 alone. It is highly crucial to keep a check on your fuel cost per mile to get to know how profitable the business will be.
Some routes have road tolls, which are mostly controlled access highways. To pass through a particular amount of cost needs to be given to save time.
To keep the truck in optimal condition, the owner-operator needs to spend money on the repair and maintenance of the truck. This is essential to ensure smooth transportation and avoid any late deliveries.
Expenses for provisions should also be taken into account, especially for the truckers who are on overtime duties and travel long distances so they can dine out in restaurants, get some essential stuff, etc.
If an owner-operator or truck driver travels long distances, they require somewhere to rest. Lodging costs can be added up, and they become a significant expenditure for the driver.
Taxes are also a vital expenditure of a truck driver or owner-operator. The taxes needs to be paid every quarterly, and about 25 to 30 percent of the income should be set aside for taxes.
The truck expense is the biggest expense for an owner-operator or trucking company. These expenses simply depend upon whether you are buying a truck or leasing it. The cost of buying a semi-used truck can be around $50000 or $140000, while a new truck can cost around $80000 to $200000.
Hence, the annual income of an owner-operator gets mostly utilized in the truck owner-operator expenses.
Some other important things need to be spent to run a trucking business smoothly. They might not be seen as the prime needs, but they play a very significant role for the trucking company or owner-operator.
Semi-truck insurance costs around $3000 to $5000 annually, but some premium insurance packages are even higher depending on the type of insurance chosen. The person operating under its authority can expect to pay around 3 to 4 times more. Not only this but amongst several owner-operator trucking expenses, there is another expenditure of health insurance which is needed in case of accidents, physical damage, and bobtails.
The need for licenses and permits annually is also another addition to the truck owner-operator expenses. These costs must be paid regularly depending on the country in which the driver operates. The license and permit costs include business licenses, license renewal fees, transport permits, registration fees, and vehicle inspections.
A new owner-operator requires help with marketing, tax filing, managing freight brokers, and bookkeeping. So, an owner-operator is expected to pay 10 to 20 percent of the gross margin to the broker for every trip. Apart from this, there is staff which handles accounting, dispatching, customer services, etc for which they need to be given proper payouts.
How much does an average owner-operator make after expenses? This is a very popular question asked in the trucking industry; well, a truck owner-operator can expect a yearly salary of around $45,000 to $80,000 a year considering the hours allowed by the government for work and after deducting all the expenses. Remembering the fact that the gross income of owner-operators annually is around $ 220,000 to $240,000, it can be said that the total expenses cost around $150,000. Apart from this, How much an owner-operator makes heavily depends upon the fluctuating fuel charges, maintenance costs, freight broker costs, load board fees, and other fixed and variable expenses.
To maintain a profitable truck-driving business, the trucking company or owner-operator should make sure that the expenses are under control. Their best efforts should be to reduce the trucking expenditures and take more money back home. There are a few ways in which the truck expenses can be reduced so more profit can be made out of the trucking business. Most truckers believe that fixed costs are inevitable and only variable costs can be decreased. They reduce these variable costs through advanced planning, selecting the right lease, and various other strategies.
Some ways are mentioned below which can help an owner-operator in the reduction of owner-operator expenses.
Before buying or leasing a new truck, always search for different options and choose the truck that best suits your needs. Before finalizing the model, look at which truck model needs how much maintenance cost, expected fuel cost, required upfront capital, and type of lease/loan.
Before going on long trips it's better to prepare the plan for meals before time. This will save time and prevent the expenditure of money on expensive restaurants.
Maintaining a good relationship with shippers is of great support and benefit. This good relationship can get you a contract from a shipper without the intervention of a freight broker or load board.
Planning the route can reduce truck expenses as it is crucial to plan the route to understand the cost per mileage and fuel consumption. It also helps in planning lodging and meals, which saves a good amount of time.
The summation of complete facts and figures mentioned above leads to the result that an in-depth idea of owner-operator income and expenses is highly important in the trucking business. This can be the only way to know how much the business is profitable and how can it be made even more profitable. The trucking company or owner-operator should be well aware of even the slightest expenses in the trucking business as it can affect the profit margins and other crucial things. In a nutshell, the trucking business is surely a good business to earn money if the owner has a good idea of each thick and thin in the trucking business, causing fluctuations in pay rates and profits. The owner should know how to reduce the trucking expenses and how to increase the profits to run an efficient, smooth and lucrative trucking business.
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